Hebron, Ky. – Cincinnati/Northern Kentucky International Airport (CVG) has announced plans for a new use agreement that could ultimately end Delta’s long sway over the facility.
The airport and the airlines have agreed on a framework for a new modernized use agreement. The airport entered into the current use agreement with carriers in 1972. The existing use agreement expires Dec. 31, 2015. The use agreement governs the manner in which fees and charges are assessed at the airport.
The new deal will be much shorter than the previous agreement, with contracts now lasting only five years, and allow for more airline companies, such as Allegiant and Frontier Airlines, to have a greater say over operating decisions at the facility.
“Allegiant compliments the leadership of CVG for creating a new agreement structure that enables carriers to operate in a safe, efficient and cost effective manner. This agreement makes a commitment to keep carrier cost stable and reasonable over the next five years and we look forward to further building on our existing network at CVG,” said Keith Hansen, Director of Airport Planning, Allegiant Travel Company.
This a list of the key substantive terms:
• Five Year Term: January 1, 2016 through December 31, 2020. Shorter terms of 3-5 years are now the industry norm.
• Control Over Capital Projects: The New Agreement provides the Airport with greater control over capital projects. Under the Existing Use Agreement, with a few limited exceptions, airlines must approve all capital projects/expenditures. The New Agreement provides greater latitude for airport controlled capital spending and limits airline approval.
• Revenue sharing/discretionary funding: The New Agreement permits the Airport to retain discretionary revenue at the end of each year. The Existing Agreement provides that all revenues are refunded to signatory carriers under a formula provided in the Existing Use Agreement. The New Agreement is structured to permit the airport to retain discretionary capital and cash balances through a sharing of revenue with the airlines, with the airport being paid first.
This will allow CVG to build cash balances for greater long-term airport stability. The airport will also be able to fund projects important to the airport’s future while maintaining airline operating costs at reasonable levels. This also has positive implications on the airport’s credit rating.
• Minimum signatory requirements: The New Agreement provides that passenger airlines must rent at least one gate to become a signatory to the agreement. Cargo carriers must lease a defined amount of space or have a minimum defined annual landed weight. Currently cargo carriers are not permitted to be parties to the Existing Use Agreement.
This will allow DHL and Federal Express to now become signatories to the agreement. These minimum requirements also provide a low barrier of entry for potential new signatories.